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Michael Stolpe (Kiel Institute; DFG-Cluster of Excellence “Precision Medicine”; Leibniz Research Alliance INFECTIONS)
We develop an open economy model to explain how demand for healthcare is influenced by distributional ethics at home and innovation in medical technology abroad. With international trade in medical technology, countries pursuing distributional objectives may be tempted to use the monopsony power of a national health system to suppress prices and rely on the innovation incentives of other sufficiently large countries that do not pursue distributional objectives. From a global point of view, the private and societal incentives for innovation may diverge which may lead to underinvestment in health and international trade conflicts.
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